Lagarde Says Confidence Can Be Restored With Euro Firewall

Jan. 24 (Bloomberg) -- International Monetary Fund Managing Director Christine Lagarde said that the construction of a “firewall” to prevent the region’s sovereign debt crisis from spreading is necessary to restore confidence and boost growth in the region.

Speaking on France 2 television in Paris, Lagarde said that Germany can be convinced to help construct such a mechanism if other countries accept budget discipline.

Germany “expects, in return, real efforts on the part, notably of Greece, but also of other countries in difficulty,” Lagarde said. “There is a need for discipline, sanctions, automaticity to all that. There is a need for a sort of European fervour for budgets to be constructed on solid bases. Given all that, Germany can understand that defense counts too.”

Lagarde also said that banks are being re-capitalized across Europe, though that strengthening of balance sheets must not be done through providing less credit to the economy.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Mark Deen at markdeen@bloomberg.net